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For decades the EU-wide corporate growth models were based generally on cheap goods (presumably from China) as well as affordable energy with favorable prices (from Russia) and “partially outsourcing security and investment”, as the Commission President noted recently. Thus, the Commission calls on the member states’ leaders to “help turn around the region’s sluggish economy” and adopt policies to boost growth in line with the suggested EU competitiveness compass.
Background
In November 2024, Commission President announced a draft of the Competitiveness Compass to activate the EU-wide efforts in speeding-up growth patterns. Even before that, in the State of the Union Speech in 2023, she noted that “Europe would no longer be able to rely on those factors that have supported growth in the past”.
Thus, both the EU institutions and the member states governance must use all their strengths to “quickly harness own pathways to innovation-based productivity growth towards a climate-neutral future”. The competitive compass provides a plan, a road map and a political will; now, it is time to speed up and unite to boost innovation, push on decarbonization, secure energy supplies and trade flows, she noted.
During last two decades, the EU could not keep pace with other major economies due to a persistent gap in productivity growth. The EU has what is needed to reverse this trend with its talented and educated workforce, capital, savings, Single Market, unique social infrastructure, provided it acts urgently to tackle longstanding barriers and structural weaknesses that hold it back. Bottom-line: the EU-27 “must become more business-friendly” to match the global competition levels.
EU Competitiveness Compass
This January, the Commission presents the Competitiveness Compass, the first major initiative of the new College’s mandate providing a strategic and clear framework to modernise growth.
The Compass sets a path for Europe to become the place where future technologies, services and clean products are invented, manufactured and put on the market, while being the first continent to become climate neutral.
The EU must urgently tackle longstanding barriers and structural weaknesses that hold it back: Europe has not kept pace with other major economies, due to a persistent gap in productivity growth. The EU has fallen behind the US in advanced technologies, while China has caught up in many sectors, and is winning the race for leadership in certain new growth areas.
The “root cause” notes the compass, is the lack of innovation: the EU failed “to translate its ideas into new marketable technologies”, and failed to quickly integrate new technologies into the industrial base.
At the same time, domestic constraints are hampering the ability of European companies to fight back: they are being squeezed by high energy prices and a high regulatory burden. The states’ businesses also faced increasingly unlevel global playing field, characterized by the large-scale use of industrial subsidies around the world.
Note. Some statistics can be found in: https://www.politico.eu/article/ursula-von-der-leyen-competitiveness-compass-pitch-relies-on-government-help/?utm_source=email&utm_medium=alert&utm_campaign=Von%20der%20Leyen%E2%80%99s%20bid%20to%20boost%20business%20relies%20on%20government%20help%C2%A0
Europe is also increasingly dependent on strategic inputs and highly concentrated supply chains. Hence the compass pursues two broad goals: first, to identify the policy changes needed for Europe “to shift to a higher gear”; in some areas, existing policies will need to be upgraded while in others, a step-change is required to “adapt to new realities”.
The second goal is to develop new ways of “working together” to increase the speed and quality of decision-making, simplifying frameworks’ regulations and overcome fragmentation.
The compass’ conclusion is that the EU-27 can excel in global competitors only by aligning the EU and national policies around the same objectives and reinforce each other.
The Commission acknowledges that many key growth sectors, e.g. taxation and labour markets, industrial policies and education, etc. are largely or partly in the hands of the member states governance with the Commission as the institution in coordinating and supporting national reforms, priorities and strategies.
Reference and citation form final communication in:
https://commission.europa.eu/document/download/10017eb1-4722-4333-add2-e0ed18105a34_en
Economic doctrine for the next five years
Executive Vice-President Séjourné in her comments on the EU competitiveness compass underlined three elements of the “road-map” to excel competitiveness”.
More on Commission’s VP in: https://www.integrin.dk/2024/11/30/new-european-commissions-college-competences-and-roles-for-next-five-years-part-i/
First, presenting in the next few weeks, as the VP calls it -“simplification omnibus”; thus at the end of 2025/beginning of 2026, the Commission will present a “single 28th regime”, which will introduce what the EU companies have been calling for:, instead of 27 different. Generally, the Commission is convinced that the integration of the single market offers tremendous potential for simplification.
Second, investment, i.e. increasing funding and liquidity, with the private capital is a lever: hence, the Commission will propose the creation of a new EU-wide “savings products and investment-friendly legislation”. In this direction two aspects are vital: a) creating a EU-wide competitiveness fund in the next multiannual budget to enable public money “to free up” more private investment; and b) new “tools for coordinating competitiveness policies”, to enable EU-wide efforts, particularly in terms of innovation. Additionally, some coordinate strategies and investments in raw materials will follow, e.g. as the EU did through purchasing at European level in the past with vaccines and gas.
Third is “systemic efforts” through optimizing numerous economic sectors at national and the EU-wide levels. Traditional sectors which underpin the EU economy, such as chemicals, steel and automotive, etc. will benefit from the strategic dialogue; competitiveness also depends on the efforts to foster the emergence and growth of the “future of Europe’s” sectors, such as clean tech and biotech, artificial intelligence and digital transition, to name a few.
The meeting of these two ambitions, as the Executive Vice-President Séjourné notes is aimed at developing the traditional sectors on the one hand, and the new clean technologies on the other; this “combined efforts” will be the subject of the Clean Industrial Agenda, which the Commission will present in the coming weeks.
The success of success of these efforts will be measured by 4 ambitions: – opening more factories than are closed; – producing more in Europe (so-called “made in Europe” concept); – increasing employment in Europe; and – increasing the number of European unicorns.
Reference and citations from: https://ec.europa.eu/commission/presscorner/detail/da/statement_25_371